“If you are ready to give up everything else – to study the whole history and background of the market and all the principal companies… as carefully as a medical student studies anatomy – … and, in addition, you have the cool nerves of a great gambler, the sixth sense of a clairvoyant, and the courage of a lion, you have a ghost of a chance.” (a note we keep on our trading desk that makes us hungry and to keep us humble)
We often remind our readers that one good or bad day in the market doesn’t mean a trend change and that there are a lot of technical indicators that need to be taken out before one takes place. Sometimes there are trading ranges before a trend change takes place. They can be flat or violent depending on what’s happening in the world and they can make investors nervous which causes panic.
We mentioned we started our homework for this week last Friday night shortly after the market closed and it’s a good thing we love what we do. We normally start our research for the coming week on Sunday evenings after relaxing on Friday nights and forgetting about the market on Saturday and most of Sunday. However, we were puzzled on why there were so many talking heads and Wall Street pros who were so bullish last Friday because we just weren’t buying it.
We love Monday’s, believe it or not, because our game plan is already in place so all we have to do is go to the office and get ready for trading. We already know what needs to happen with our current trades, we know the time frame, and we know the technical levels.
This help keeps our emotions in check which is why you must ignore the talking heads and it is one of the most important traits you can have as a trader. For new traders, it may sound crazy but you buy put options near market tops and you buy call options near market bottoms which is a very hard thing to do because your timing has to be just right. Most people only want to be in the market when it goes up but by doing that they cut their chances in half on being a successful trader.
Thursday’s selloff was a quick reminder on how tricky the market can be and how those same suit-and-ties can change their minds on a dime. If you do this as an option trader you will lose a lot of money which is why we always remind our readers to plan your trades and trade your plan.
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